ProShares Unveils Novel Daily Covered-Call ETF

ProShares has introduced a novel covered-call strategy that offers exposure to the S&P 500 as the firm adds another fund to what’s been a popular, and potentially crowded, category this year.  

The ETF issuer, which has $60.2 billion in assets under management in 141 exchange-traded funds, launched the S&P 500 High Income ETF (ISPY) on Dec. 20. The fund tracks the S&P 500 Daily Covered Call Index, which is designed to replicate a daily covered-call strategy that “sells call options with one day to expiration each day,” ProShares said in a press release.  

“This a real innovation, and it’s a very different investment profile than a lot of the existing traditional monthly covered-call strategies,” Simeon Hyman, global investment strategist at ProShares, said in an interview. 

“It allows for the generation of high income, but also the opportunity to generate S&P 500 returns over time and capture the returns that may be sacrificed by a lot of the traditional strategies,” he added.  

Covered-Call ETFs  

Covered-call strategies have been a popular way for investors to generate income this year. The JPMorgan Equity Premium Income ETF (JEPI) has exploded as the fund has brought in $12 billion in 2023. It has attracted over $30 billion since its launch in 2020.  

“JEPI is the envy of the industry because of how successful it’s been,” Todd Sohn, ETF analyst at Strategas Securities, told etf.com earlier this year. 

Other so-called copycat funds from BlackRock and Goldman Sachs used covered-call income strategies after the success of JEPI and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ). Yet while covered call has been a popular method of gaining income for investors, it’s unclear if the fad will continue into the new year.  

“How many iterations of covered-call strategies could come to market in a single year? It’s just crazy,” said Bryan Armour, ETF analyst at Morningstar. 

“The big thing that people don’t realize is that the money you collect from selling a call option is not free,” he explained. “It’s basically just locking in some of the volatility of whatever you’re holding.”  

Contact Lucy Brewster at [email protected]